Author Archives: Matthew Stephenson

Unknown's avatar

About Matthew Stephenson

Professor of Law, Harvard Law School

Announcement: London Conference on Asset Recovery and Procurement Corruption

Posted on by
Reply

As GAB readers are no doubt aware, two of the hottest topics in the anticorruption world — topics we’ve devoted a great deal of attention to on this blog — are stolen asset recovery (see here, here, here, here, and here) and fighting corruption in government procurement (see here, here, here, here, and here).

For those who are interested in these topics, I’ve recently learned that the London Centre of International Law Practice will be holding what looks to be a very interesting conference on both these subjects on June 22-23, in London. It looks like a very interesting set of speakers, with a lot of legal practitioners (but some good representation from TI-UK and other anticorruption NGOs as well). I regret I won’t be able to make it myself, but for those who are interested, you can find out more about the conference here.

Guest Post: Using Big Data to Detect Collusive Bidding in Public Procurement

Posted on by
3

Bence Tóth and Mihály Fazekas of the Corruption Research Center Budapest (CRCB) contribute the following guest post:

As several earlier posts on this blog have discussed (see, for example, here, here, and here), collusion and corruption in public procurement is a significant problem, one that is extremely difficult to detect and combat. The nature of public procurement markets makes collusion easier to sustain, as pay-offs are higher (demand is often inelastic due to the auction mechanisms used), administrative costs increase entry barriers, and the transparency of procurement contract awards–often intended as an anticorruption device–can actually make it easier for cartel members to monitor one another and punish cheating. Law enforcement agencies have tried various techniques for breaking these cartels, for example by offering leniency to the first company that “defects” on the other cartel members by exposing the collusive arrangement. However, although leniency policies have sometimes proven to be an effective tool to fight coordinated company behavior, the efficacy of this approach is limited given the relative unlikelihood that the government will ever acquire convincing evidence of collusion absent such a defection by an insider. Hence, there is great need for alternative methods to identify collusive rings and guide tradition investigation.

In many markets, using quantitative indicators to detect collusion has not been feasible, as gathering meaningful tender-level data (or even market-level data) is too costly, or simply impossible. However, in the case of public procurement markets, there is a huge amount of publicly available data, which makes the use of “Big Data” techniques to pinpoint collusion-related irregularities more feasible. Indeed, in collaboration with our colleagues at CRCB, we have developed a simple, yet novel approach for detecting collusive behavior. Continue reading →

Guest Post: Typologies of (Anti-) Corruption — How Much More Boring Can It Get? Or Maybe Not…

Posted on by
4

Dieter Zinnbauer, Senior Program Manager for Emerging Policy Issues at Transparency International, contributes the following guest post:

Remember that childhood game, you say a word over and over and it seems to lose its meaning and just dissolves into a melodic sound? I feel similarly about trying to slice up the umbrella concept of corruption and sort it into practical, reasonably comprehensive, and distinctive subcategories – an endeavor that usually gets out of hand, consumes disproportionate amounts of scarce thinking-time and energy, and eventually leaves the participants more confused and in disagreement than at the outset. Yet quite recently I have begun to change my mind a bit about the unproductiveness of typologizing (anti)corruption. In fact, I have begun to derive some surprising enjoyment and inspiration from playing around with different ways to look at and classify different types of (anti)corruption. Here three examples: Continue reading →

Private FCPA Enforcement: Some Troubling Trade-Offs

Posted on by
6

In my last post, I suggested that one possible drawback to dramatically ramping up enforcement of the Foreign Corrupt Practices Act against individuals (from the perspective of those who, like me, favor aggressive FCPA enforcement) is that individual defendants are relatively more likely to litigate than are corporate defendants. This not only might entail a greater drain on the resources of the government enforcement agencies—a familiar and well-understood concern—but it could also lead to adverse appellate rulings on the meaning of key FCPA provisions (particularly if the targeting of more individuals also entails the targeting of relatively more sympathetic individuals). In this post, I want to raise a similar concern in connection with a prominent proposal for increasing the FCPA’s deterrent effect: the addition of a private right of action under the statute.

The FCPA in its current form does not authorize private individuals to sue defendants for alleged violations of the statute. Although some other statutes might authorize certain forms of private FCPA enforcement—for example, in the form of shareholder derivative suits, or suits alleging violations of the antitrust laws or the RICO Act—these forms of private recourse are quite limited in their availability. (I won’t go into all the reasons in this post—Professor Gideon Mark has a nice discussion in his paper on the topic.) Yet many people (including Professor Mark) have advocated the addition of an express FCPA private right of action which, in the view of its proponents, would substantially enhance FCPA deterrence. This idea has attracted at least some interest in the U.S. Congress, though the proposed bills to add an FCPA private right of action have not yet gone anywhere.

My natural instincts are to support a proposal along these lines, both because I’m more of a “hawk” when it comes to FCPA enforcement, and because I’m generally an enthusiast for the “private attorney general” model for enforcing public law. And I could still be persuaded that a private FCPA action is a good idea. But I have concerns similar to those I raised in my last post about greater targeting of individuals, as well as some additional, closely related worries. Here are the main worries, as I see them: Continue reading →

Guest Post: Monitoring as a Democratic Imperative

Posted on by
7

Professor Paul Lagunes of the Columbia University School of International and Public Affairs contributes the following guest post:

The fact the bureaucrats who populate the ranks of the public administration do not run for office poses a significant challenge to electoral democracy—a challenge that is accentuated by citizens’ inability to properly monitor their own government. Citizens, after all, dedicate a majority of their time to private affairs and are often confused, if not repelled, by the complexities of public administration. Given this principal-agent problem, what can be done to improve monitoring, fight corruption, and hold governments accountable?

I recently had the opportunity to evaluate the efficacy of anticorruption monitoring in Mexico. This research indicates that independent audits over sensitive governmental processes can boost the levels of discipline, stringency, and honesty among civil servants. Indeed, even when communities find it difficult to overhaul their governing institutions and renew and professionalize their bureaucracies, they can rely on independent experts to raise bureaucrats’ level of accountability. But the improved monitoring associated with independent audits is only when accompanied by robust oversight and accountability. Continue reading →

Individual FCPA Liability: A Risky Proposition for FCPA Enforcement Proponents?

Posted on by
7

Both supporters and skeptics of aggressive enforcement of the Foreign Corrupt Practices Act have criticized the fact that the act is enforced much more often against corporations than against individuals. Some critics of FCPA enforcement often assert that it is unfair for the government to insist on corporations acknowledging criminal liability when the government is unwilling or unable to prosecute the individuals who committed the actual crimes. At the same time, supporters of aggressive FCPA enforcement argue that the failure to hold individuals personally liable, and to impose criminal penalties (including prison time) on those culpable actors undermines the FCPA’s deterrent effect. And they have a point: many doubt that fines and other monetary sanctions on corporations—at least at the levels that can be imposed under the FCPA—are sufficient to deter bribery, and there is evidence to support this claim.

Of course, individual FCPA liability is hardly novel; a number of past FCPA cases have included criminal convictions of individual company employees. But many have called for dramatically ramping up focus on individuals, and there are some signs that the U.S. Department of Justice may be heeding those calls. For someone like me, who tends to think that FCPA enforcement needs to be even more robust, this would seem like welcome news. And for the most part it is… but I do have a nagging worry, which may be entirely groundless, but that I want to try to flesh out in this post. The worry goes something like this: Continue reading →

Guest Post: The Aims and Accomplishments of the OECD Report on Corruption at the Sector Level

Posted on by
1

Tina Søreide, Senior Researcher at the Christian Michelsen Institute and post-doctoral fellow at the University of Bergen Faculty of Law, contributes the following guest post:

Yesterday Rick posted a critique of the OECD’s recent Report, “Consequences of Corruption at the Sector Level and Implications for Economic Growth and Development.” He did not find much value in that report (and as anyone who read his post knows, that’s an understatement). I was heavily involved in the research and preparation of this report, and although criticism is always welcome, I think that many of his criticisms are unfair, and are based on a misapprehension of the report’s purposes. This rebuttal is an attempt to clarify the aims of the report and explain why, notwithstanding Rick’s criticisms, the report makes substantial progress toward achieving those aims. Continue reading →

Anticorruption Bibliography–April 2015 Update

Posted on by
Reply

An updated version of my anticorruption bibliography is available from my faculty webpage.  A direct link to the pdf of the full bibliography is here, and a list of the new sources added in this update is here.  As always, I welcome suggestions for other sources that are not yet included, including any papers GAB readers have written.

Corruption is BOTH a “Principal-Agent Problem” AND a “Collective Action Problem”

Posted on by
9

Let me admit right up front that this is going to be kind of a nerdy post, focused mostly (though not entirely) on questions of terminology.  But there’s a particular meme that seems to have emerged in much of the discussion of anticorruption strategy, which I think is just wrongheaded and misleading.  The meme goes something like this:

“Although some people describe corruption as a principal-agent problem, corruption is actually a collective action problem.”

(I hate to point fingers, but just so you know I’m not making this up, examples of this meme appear here, here, here, here, here, here, here, and here.  Most depressingly, the not-very-good Wikipedia entry on corruption also includes this claim.)

This statement uses sophisticated-sounding social science jargon, but to anyone who knows what the terms “principal-agent problem” and “collective action problem” actually mean, in their technical economic context, it doesn’t make much sense–at least insofar as it implies that “principal-agent problem” and “collective action problem” are mutually exclusive alternatives. In fact, corruption is both a principal-agent problem (always) and a collective action problem (often).  Recognizing the latter claim need not and should not entail rejecting the former claim; the assumption that it does not only reflects conceptual confusion, but also entails the risk that we will neglect the many insights that principal-agent theory has to offer the study and practice of anticorruption.

I am certainly not the first to make this point. Heather Marquette and Caryn Peiffer have a very nice U4 Issue Paper developing many of the same themes (in greater depth). But because this has been bugging me for a while, let me offer my take on this issue:

Continue reading →

Announcement: TRACE International Essay Contest on “How to Pay a Bribe”

Posted on by
1

TRACE International, a private anti-bribery compliance support and consulting organization, is holding an essay competition that I think might be of interest to some GAB readers:

TRACE publishes biennial edited volume called How to Pay a Bribe: Thinking Like a Criminal to Thwart Bribery Schemes, which provides an informative collection of essays on the nitty gritty details on how firms and individuals pay and conceal unlawful bribes. (For information on the first two editions, from 2012 and 2014, see here and here.) For the next edition of this series, TRACE is soliciting submissions that describe real-world bribery schemes in international business. TRACE will select up to five submissions to be published in the third edition of How to Pay a Bribe, and the authors of the five winning submissions will receive a US$2,000 honorarium. The submission guidelines indicate that entries should be no more than 3,500 words, that all submissions must be original and not previously published, and that narratives and anecdotes are preferred over academic writing. The submission deadline is June 30, 2015. More information on the contest can be found on TRACE’s website here.